Information Meeting on Financial Results for 1HFY2003 December 5, - - PowerPoint PPT Presentation

Sumitomo Trust & Banking Co., Ltd.

Information Meeting

• n

Financial Results for 1HFY2003

December 5, 2003

Table of contents

Financial Results for 1HFY2003 1HFY2003 financial outlook (Non-consolidated)

• ----1

Breakdown of profit by business group

• ----2

Loan-deposit margin

• ----3

Market-based loans

• ----4

Growth of trust business

• ----5

Treasury and financial products group

• ----6

1HFY2003 credit costs breakdown

• ----7

Securities portfolio

• ----8

Minimizing down side risks Problem loans

• ----9

Migration analysis

• ----10

Reserve for “special mention” category

• ----11

Self assessment (potentially bankrupt or worse)

• ----12

Unwinding of cross shareholdings

• ----13

Capital Capital

• ----14

Forecast for FY2003 Forecast for FY2003 (Non-consolidated)

• ----15

Financial results for 1HFY2003

1

(in billions of Yen)

Net business profit before credit costs

77.3 87.1

• 9.7

General & administrative expenses

55.5 58.1

• 2.6

Personnel expenses

23.0 23.4

• 0.4

Non-personnel expenses

30.0 32.2

• 2.2

Credit costs

9.9 20.9

• 11.0

Net gains on stocks

8.9

• 16.9

25.9

Other non-recurring profit

• 11.1
• 8.4
• 2.6

Net gains on stock index futures

• 3.2

0.8

• 4.0

Net operating profit

62.3 38.2 24.0

Extraordinary items

5.7

• 4.6

10.4

Extraordinary income

8.7 26.6

• 18.6

5.2

• 5.2

Extraordinary losses

2.9 31.3

• 29.0
• 29.0
• 29.0

Net income

40.3 20.1 20.2

Net losses on securities contributed to employee retirement benefit trust

Change 1HFY2003 1HFY2002

Refund of Tokyo Metropolitan Government Tax on large banks

1HFY2003 financial outlook (Non-consolidated)

Gross Net Gross Net Gross Net business business business business business business (in billions of Yen) profit profit profit profit profit profit

1HFY2003 1HFY2002

Wholesale financial services

41.9 31.6 43.2 32.1

• 1.3
• 0.5

0.2

Retail financial services

25.7 0.1 28.4 1.6

• 2.7
• 1.5

0.4

Treasury and financial products

43.8 39.1 49.2 44.6

• 5.4
• 5.5

Fiduciary services

20.6 10.2 24.0 12.5

• 3.4
• 2.3
• 8.4
• 4.3

2.2

Pension asset management

15.5 8.4 15.1 8.3 0.4 0.1

• 2.4
• 3.0

0.0

Securities processing services

2.5 1.0 2.6 1.1

• 0.1
• 0.1
• 1.2
• 1.3

0.4

Stock transfer agency services

2.6 0.7 6.3 3.2

• 3.7
• 2.5
• 4.8

1.8

Real estate

7.4 2.9 7.0 2.7 0.4 0.2 0.1

Seasonal adjustment

• 6.5
• 6.5
• 6.5
• 6.5
• 132.9

77.3 145.2 87.1

• 12.3
• 9.7
• 8.4
• 4.3

2.9

Total profit before credit costs

1HFY2003

Net business profit of subsidiaries

1HFY2002 Change

Outsourcing fees paid to JTSB or JTAS(*)

Breakdown of profit by business group

<Fees and commissions (Banking a/c)>

(in billions of Yen)

1HFY2003 1HFY2002 change %change Domestic net fees and commissions 13.9 12.0 1.8 15% (excluding fees paid to JTAS) 18.7 12.0 6.7 56% Wholesale financial services 7.8 3.9 3.9 100% ←Securitization, syndicated loans, etc Retail financial services 2.9 1.7 1.2 71% ←Mutual fund sales Stock transfer agency services 7.4 6.2 1.2 19% Real estate 5.7 5.4 0.3 6% Fees paid to JTSB

• 3.6
• 4.4

0.8 18% Fees paid to JTAS

• 4.8

0.0

• 4.8
• Others
• 1.5
• 0.8
• 0.7
• 13%

2

*JTSB: Japan Trustee Services Bank, Ltd. JTAS: Japan TA Solution Ltd., joint venture formed with Japan Securities Agents Ltd.

(%) 1HFY2003 1HFY2002 Change Gross margin 0.88

• 0.17

1.05 Average interest yield earned 1.15

• 0.16

1.31 Average interest yield paid 0.27 0.01 0.26 Loan-deposit margin 1.12

• 0.17

1.29 Average loan interest rate 1.29

• 0.17

1.46 Average deposit interest rate 0.17 0.00 0.17 Bond yield (ave.) 0.87

• 0.22

1.09

0.0 0.5 1.0 1.5 2.0 2.5 3.0 98/3 98/9 99/3 99/9 00/3 00/9 01/3 01/9 02/3 02/9 03/3 03/9 Long term prime rate Average loan interest rate Average loan-deposit margin Average deposit interest rate

3 (%)

Loan-deposit margin (Domestic banking a/c and principal guaranteed trust a/c)

4

On balance (included in risk assets)

8.6 8.3 8.1 8.1 8.0 1.8 2.1 1.9 2.2 2.5 2 4 6 8 10 12

2002/9 2003/3 2003/9 2004/3(Plan) 2005/3(Plan)

Relationship-based Market-based

2.9 3.8 3.9 5.0 6.2

1 2 3 4 5 6 7 2002/9 2003/3 2003/9 2004/3 (Plan) 2005/3 (Plan)

Entrusted assets for securitization (ending balance)

（Trillions of yen）

Market based type: Syndicated loan, purchased loan from other banks, corporate bond, etc

Market-based loans and securitization

Increase market-based type proportion Diversify loan portfolio Improve RAROA Total service from origination, trustee and primary broking Wide-ranged investors

• Both corporations and financial institutes

（Trillions of yen）

Off balance (excluded from risk assets)

6.8 7.5 8.6 9.3 3.3 2.8 3.6 4.3 5.3 8.3 9.1 10.6 6.3 5.3 4.7 4.5 5.0 4.8 9.1 8.4 8.3 8.7

5 10 15 20 25 30 35 40 45

1999/3 2000/3 2001/3 2002/3 2003/3 2003/9

Mutual fund Securities trust Pension tokkin Tokkin Pension trust Public pension

Volume of entrusted assets (ending balance)

Growth of trust business

（Trillions of yen）

*Amount of assets Cost basis : mutual fund, tokkin and pubic pension Mark-to-market basis : securities trust, pension tokkin and pension trust

5

5,000 10,000 15,000 20,000 25,000

95 96 97 98 99 00 01 02 03

3 4 5 6 7 8

Treasury and financial products group

Cash

(Loans, Deposits)

Derivatives

(Futures, Swaps, Options)

Bonds Different accounting rules applied to each interest-related financial products

*excluding hedge accounting derivatives

Treasury and Financial products group Generate stable profit (Total management of various requirements)

• Management of total

interest-rate-risk position

• Impact to B/S
• Volatility of earnings

Reduction of cross shareholdings, improved asset quality

Increasing difficulty in operation

(ALM strategy) Balanced business portfolio Adjustment of interest rate risk exposure

Sophisticated risk management Astute operation (Organization, human resource)

(％) Cross shareholdings (Market value) (100 million yen) (Left) Nikkei 225 (Yen) (Left) 10 yr US Treasury yield (Right)

Accrual basis Mark to market reflected on B/S Mark to market reflected on income statements (*)

6

FY2002 1HFY2002 2HFY2002 1HFY2003

Write-off / reserve 80.7 19.9 60.8 19.2

Trust a/c

20.3 16.5 3.7 2.2

Banking a/c

60.4 3.4 57.0 17.0 5.1 1.0 4.0

• 9.3

85.9 20.9 64.9 9.9

Total credit costs Notes

Net transfer to general reserve

Credit costs

7

1HFY2003 credit costs breakdown

Mainly write-offs for 2HFY2002 Write-offs for 1HFY2003: approx. 3.0 billion yen => Reflected on trust a/c credit costs for 2HFY2003

Increase secured portion of DCF method applied borrowers => Write back of reserves:

• approx. 3.0 billion yen

Decrease of special mention category in banking a/c (approx. -80.0 billion yen) => Write back of reserves:

• approx. 6.0 billion yen

Write-offs, sales: approx. 6.0 billion yen Increase of specific loan loss reserves for final disposal of NPLs in 2HFY2003: approx. 8.0 billion yen Increase of specific loan loss reserve due to borrowers’ migration to worse categories: approx. 10.0 billion yen Write back of specific loan loss reserve due to borrowers’ migration to better categories: approx. 7.0 billion yen (in billions of Yen)

8

Securities Portfolio

Historical cost and net unrealized gains (losses) of securities

(for securities market price available) (Non-consolidated / after devaluation )

• Sep. 2003
• Mar. 2003

Change

• Sep. 2003
• Mar. 2003

Change

• 100.2

117.8

• 17.6

2.4 3.9

• 1.4

13.7 13.7

• 0.5

0.7

• 0.2

113.9 131.5

• 17.6

3.0 4.7

• 1.7

Billions of Yen Foreign bonds and others Total Net unrealized gains (losses) Cost Stocks Bonds (JGB)

Trust a/c

• Sep. 2003
• Mar. 2003

Change

• Sep. 2003
• Mar. 2003

Change

487.0 588.7

• 101.7

70.5

• 63.6

134.2 1,203.6 1,094.8 108.7

• 12.9

8.4

• 21.4

1,790.2 1,571.3 218.8 15.9 35.6

• 19.6

3,480.9 3,254.9 225.9 73.5

• 19.5

93.1 Net unrealized gains (losses) Cost Billions of Yen Stocks Bonds (JGB) Foreign bonds and others Total

Banking a/c

Minimizing downside risks

9

Problem loans

5.4% 6.1% 5.1% 3.6% 3.4%

100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 2001/9 2002/3 2002/9 2003/3 2003/9

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12%

Bankrupt / practically bankrupt (Left) Doubtful (Left) Substandard (Left) Ratio to total loan balance (Right)

(Billions of Yen) Note: Amounts in the chart are for both banking and principal guaranteed trust a/c Special mention (excluding substandard) (Left)

10

Write-off, sales, or

(in billions of Yen)

collection

Bankrupt / practically bankrupt

25.7 29.0

• 3.3

2.6

• 0.1
• 5.8

Doubtful

133.6 176.7

• 43.0

15.8

• 1.7

0.1

• 20.2
• 37.0

Loans to substandard debtors

227.9 209.5 18.4 25.9

• 13.0

19.3

• 2.5
• 11.2

Loans to special mention debtors

(excluding loans to substandard debtors)

• 97.1

Downgrade (-) Upgrade (+) Upgrade (-)

• 23.2

3.0

• 43.0

587.9 703.3

• 115.4

44.9

• Sep. 2003
• Mar. 2003

Change Downgrade (+)

• Migration analysis

Banking and principal guaranteed trust a/c

1HFY2003

General reserve

Substandard loans Substandard debtors

(Uncovered portion) Special mention debtors

Ordinary loans

(excluding Substandard debtors)

( = Watch list) 1.8% <Banking a/c>

• Sep. 2003
• Mar. 2003

6.1% 9.2% Change 18.2% 25.0% 0.5% 5.6%

• 6.8%

52.5% 50.7% 9.5% 0.1%

• 0.3%
• Ordinary

0.1% Special mention

11

Reserve for “special mention” category

Classification under the Financial reconstruction law Classification under self-assessment

Amount

(Billons of Yen)

Coverage ratio* Reserve ratio**

Bankrupt/ Practically bankrupt 19.7 100% 100%

Change from Mar. 2003

• 2.2
• Doubtful

117.8 93% 79%

Change from Mar. 2003

• 41.8

7% 13%

* Coverage ratio: Ratio of secured and/or reserved portion against total loan amount ** Reserve ratio: Cash reserve ratio against the unsecured portion

12

Self assessment (potentially bankrupt or worse)

Banking a/c Trust a/c amount Covered by Deposits, JGB, etc

Covered by real estate or guaranteed

Unsecured Amount Covered by Deposits, JGB, etc

Covered by real estate or guaranteed

Unsecured Legally bankrupt 11.6 0.6 11.0 0.0 4.8 0.0 4.8 0.0

• 3.0
• 0.5
• 2.4

0.0

• 0.9

0.0

• 1.0

0.0 Virtually bankrupt 8.0 0.4 7.5 0.0 1.1 0.0 1.1 0.0 0.8 0.1 0.7 0.0

• 0.1
• 0.0
• 0.0

0.0 Potentially bankrupt 117.8 32.8 74.1 10.8 15.7 0.2 11.3 4.1

• 41.8
• 18.9
• 10.6
• 12.2
• 1.1
• 1.1
• 0.0

0.1 Total 137.6 33.9 92.8 10.8 21.7 0.2 17.3 4.1

• 44.1
• 19.3
• 12.4
• 12.2
• 2.2
• 1.1
• 1.1

0.1

Real estate collateral Banking a/c Legally and virtually bankrupt; approx. 14.3 billion yen; Potentially bankrupt: approx. 79.1 billion yen Trust a/c Legally and virtually bankrupt; approx. 4.6 billion yen; Potentially bankrupt: approx. 6.8 billion yen Total 104.8 billion yen

(in billions of Yen)

* Number in the second raw in each category denotes difference from Mar. 2003.

(Bankrupt / practically bankrupt

(Doubtful) 104.8 billion Yen * 10% + 15.0 billion Yen = 25.5 billion Yen

Uncovered amount for Potentially Bankrupt or worse categories totals 15.0 billion yen 10% is the estimated loss ratio under the stress scenario on sales of real estate collaterals. As of Sep. 30, 2003

13

（Billions of yen）

775 706 760 722 525 558 840 589 487 300

100 200 300 400 500 600 700 800 900

2002/9 2003/3 2003/9 Current target

Tier I Market value Cost

Unwinding of cross shareholdings

Sold off 101.7 billion (*) Yen of stocks in 1HFY2003 (Original plan: 100 billion Yen)

517 (45) 223 (26) 278 (29) Those companies’ stocks with more than 5 billion yen of cost basis amount Numbers in parentheses are number of those companies

Capital

713.2 billion yen

14

Tier I as of Mar. 2003 (Non-consolidated)

766.4 billion yen

2HFY2003 FY2004 FY2005 FY2006 FY2007 1HFY2008 Total Net business profit before credit costs 67.6 145.0 150.0 165.0 175.0 87.5 790.1 Net income before income taxes 31.8 90.0 110.0 125.0 135.0 67.5 559.3

• a. Taxable income before deduction of existing deferred tax assets factors

626.4 billion yen

• b. Effective tax rate for calculation of deferred tax assets

40.46%

• c. Net deferred tax assets (Non-consolidated)

200.7 （c÷b）/a×5yr 3.95 yr

Billions of Yen

Capital

Tier I as of Sep. 2003 (Non-consolidated)

Deferred tax assets 37% Deferred tax assets 26%

Forecast for FY2003

15

Forecast for FY2003 (Non-consolidated)

FY2003 1HFY2003 FY2002 Change

(in billions of Yen)

Forecast (A) Actual Actual (B) (A) - (B) Net business profit before credit costs

145.0 77.3 158.8

• 13.8

Credit costs

40.0 9.9 85.9

• 45.9

Banking a/c

35.0 7.7 65.6

• 30.6

Trust a/c

5.0 2.2 20.3

• 15.3

Net non-recurring items

• 5.0
• 2.2
• 141.3

136.3

Net operating profit

100.0 62.3

• 68.3

168.3

Net income

60.0 40.3

• 56.5

116.5

This presentation material contains information that constitutes forward- looking statements. Such forward-looking statements are not guarantees

• f future performance and involve risks and uncertainties, and actual

results may differ from those in the forward-looking statements as a result of various factors including changes in managerial circumstances.